The publisher acknowledged that it doesn't own the rights, but potential 'shared code' led to the takedown demand.

Leisure Suit Larry creator Al Lowe put a number of interesting artifacts from his Sierra days up for auction a couple of weeks ago, including the source code for the original Leisure Suit Larry on 5.25" diskettes. Bidding quickly skyrocketed, but shortly after the auction went live it was canceled, as did a separate auction for the LSL2 code.

Lowe pulled the plug on the auctions, according to Britton Mathews of the Sierra Gamers Facebook group, after receiving a letter from a law firm hired by Activision demanding that he take them down. Interestingly, Activision acknowledged in the letter that it does not own the rights to the Leisure Suit Larry IP, but said that the source code probably contains "shared code" that's also present in the King's Quest and Space Quest games, which it does own. That was apparently enough to spur the takedown notice.

Lowe anticipated something like this when he posted the auctions, and so included a note saying that the winning bidder "will not own the intellectual property rights to the game." He told Mathews that he believes he's in the right legally—but the costs of fighting Activision's takedown demand would be more than the auctions would bring in.

Lowe confirmed in an email that Mathews' account of their conversation is accurate. When asked if he had any alternate plans for the source code diskettes, he suggested that "searching for the bulk eraser from [his] reel-to-reel tape days" was the only thing that had come to mind so far. I suspect he was not being entirely serious.